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Skoda Auto Volkswagen India Private Limited has decided to put a halt to production from the middle of December until the middle January. This is the second shut down the company has called for. The company had shut down production between the middle of October and the middle of November earlier. Their Chakan facility will remain closed for the period.
This shut down comes at a time when the auto industry in India is in the middle of the steepest decline over the past 20 years. The company's overall exports have been alright so far with a 3 percent increase, domestic sales have witnessed a drop of 11 percent over the last seven months.
With its India 2.0 project a year and a half away, the company is struggling to keep afloat. Export markets are slowing down, and domestic volumes are at an all time low. In addition, the company's decision to discontinue diesel engine will put them in a more difficult position. The company will probably miss its annual target by 15 percent this year alone.
According to Economic Times Auto, one of the few people aware of the company's plans, said, "With its modular MQB architecture being implemented in more markets around the world, the demand for Indian products, which are based on the old generation PQ25, has been gradually going down. The low offtake in the domestic market in not helping either. There is a pressure to install the MQB line in India at the earliest to align with global production.
Skoda Auto Volkswagen's plan is to move to the new-generation MBQ line by May 2020 in order to prepare for the future. The company says they are preparing for the next generation of products, and the current shut down is in sync with their plans.
The company also said that all their facilities were in getting upgrades in order to cater for new production lines, and all their planned shut down phases have been worked around meeting customers deliveries without any delay.
Skoda Auto Volkswagen has stopped production of the Ameo sedan which was specifically built for India. In addition, the company is running behind schedule with upgrades for the Polo, the Vento, and the Rapid range of cars. They say that only a few engine options will be available after the BS-VI norms are in play.
In addition, a massive drop in sales for their products in Mexico has affected production in India. Mexico is the largest market for VW India, and the company does not seem to have a Plan B in place.
The Mexican market has kept production at peak so far and reducing sales have resulted in manufacturing being brought down to just 50 percent. Skoda Auto Volkswagen is feeling the heat, and running operations seems to be a high pressure task for now.
Thoughts About Skoda Auto Volkswagen Shutting Production For One More Month
This is possibly the worst situation that an automaker can be in. Skoda, and Volkswagen were once big players in the Indian market, but not anymore. Shutting down production for a month means the company is desperately trying to stay afloat, and hoping that the next 18 months turns things around.